Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Cumis Insurance Society, Inc. v. Vallatini

United States District Court, D. Hawaii

July 16, 2018

CUMIS INSURANCE SOCIETY, INC., Plaintiff,
v.
THOMAS VALLATINI, et al., Defendants.

          ORDER DENYING DEFENDANT'S MOTION TO DISMISS COUNT III

          DERRICK K. WATSON UNITED STATES DISTRICT JUDGE

         INTRODUCTION

         Cumis Insurance Society, as subrogee, seeks to recover from Vallatini the claims paid to its insured and Vallatini's employer, Kauai Government Employee's Federal Credit Union (“KGE”), as a result of Vallatini's allegedly fraudulent lending practices. Vallatini moves to dismiss the breach of implied contract claim asserted in Count III. The First Amended Complaint (“FAC”), however, adequately states a claim for breach of implied contract based upon Vallatini's implied obligation, as a condition of his continued employment with KGE, that he would “comply with company policy regarding approval of loans to borrowers and selling repossessed vehicles to the highest bidder.” FAC ¶ 18. KGE performed under the implied-in-fact contract, while Vallatini, allegedly, did not. Because Cumis, as subrogee, alleges it suffered pecuniary losses when it paid claims under the fidelity bond to KGE, which were a reasonably foreseeable consequence of Vallatini's breach, Cumis may seek to recover these losses as an available breach of contract remedy. Accordingly, the Court DENIES Vallatini's Motion to Dismiss Count III for failure to state a claim and his alternative request to bar Cumis from seeking monetary damages on its breach of implied contract claim.

         BACKGROUND

         I. Plaintiff's Allegations

         Cumis provides insurance products, including fidelity bonds, to federal credit unions. FAC ¶ 1, Dkt. No. 29. Cumis issued a fidelity bond to KGE providing coverage for losses incurred as a result of fraudulent or dishonest acts by specified individuals, including Vallatini. FAC ¶ 5. Vallatini was employed by KGE as a Senior Loan Manager, FAC ¶ 2, and his allegedly fraudulent acts committed “between 2008-2014 in approving loans for various members of the Credit Union, ” resulted in Cumis “making payments under the fidelity bond, which now forms the basis of this lawsuit, ” FAC ¶ 6.

         On August 21, 2014, KGE notified Cumis of its claims under the fidelity bond, seeking repayment of losses incurred when borrowers defaulted on loans improperly approved by Vallatini. According to Cumis, in approving loans to certain borrowers in violation of KGE policies, Vallatini “knowingly and intentionally misrepresented that various members were qualified borrowers when in fact, they were not[.]” FAC ¶ 6. As a result of KGE's claim on the bond, Cumis alleges it “became obligated to pay the Credit Union sums in excess of this court's minimum jurisdiction, and Cumis has since become subrogated to the rights of, and stands in the shoes of the Credit Union to pursue Defendant Vallatini and any other responsible third party for reimbursement of this amount[.]” FAC ¶ 7.

         II. Vallatini's Motion to Dismiss Count III Following dismissal of the prior complaint with leave to amend, Dkt. No. 26, Cumis, as subrogee of KGE, alleges three causes of actions against Vallatini: (1) fraudulent misrepresentation (Count I); (2) negligent misrepresentation (Count II); and (3) breach of implied contract (Count III).[1] Vallatini seeks dismissal under Rule 12(b)(6) of Count III for failure to state a claim for breach of implied contract and to plead allowable damages under the same. Count III alleges, in part, that:

an implied contract existed as between the Credit Union and Defendant whereby Defendant agreed not to misrepresent information to the Credit Union regarding borrowers' qualification for loans, not to grant preferential treatment to any borrower, to properly record security interests in any collateral, to act in good faith [with] respect to []his duties as Senior Loan Manager, and to comply with company policy regarding approval of loans to borrowers and selling repossessed vehicles to the highest bidder, among other things.

         FAC ¶ 18. Cumis further asserts that KGE performed its obligations under the implied contract by continuing to employ and pay compensation to Vallatini, FAC ¶¶ 19-20. However, “each of the misrepresentations made by Defendant to the Credit Union as set forth in [the FAC] constitute a failure to perform under the implied contract, and said failures to perform were not excused.” FAC ¶ 21. Cumis contends that as “the subrogated insurer of the Credit Union [it] stands in the shoes of its insured, and thus has privity of contract with Defendant [Vallatini].” FAC ¶ 22.

         Vallatini maintains that Cumis fails to sufficiently allege the existence of an implied contract between himself and KGE in the at-will employment context.

         STANDARD OF REVIEW

         Federal Rule of Civil Procedure 12(b)(6) authorizes the Court to dismiss a complaint that fails “to state a claim upon which relief can be granted.” Rule 12(b)(6) is read in conjunction with Rule 8(a), which requires “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). The Court may dismiss a complaint either because it lacks a cognizable legal theory or because it lacks sufficient factual allegations to support a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988). Pursuant to Ashcroft v. Iqbal, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” 555 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 570 (2007)).

         A court may consider certain documents attached to a complaint, as well as documents incorporated by reference in the complaint, or matters of judicial notice, without converting a Rule 12(b)(6) motion to dismiss into a motion for summary judgment. United States v. Ritchie, 342 F.3d 903, 908-09 (9th Cir. 2003); ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.